Correlation Between GM and 4 Less
Can any of the company-specific risk be diversified away by investing in both GM and 4 Less at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and 4 Less into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and 4 Less Group, you can compare the effects of market volatilities on GM and 4 Less and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of 4 Less. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and 4 Less.
Diversification Opportunities for GM and 4 Less
Pay attention - limited upside
The 3 months correlation between GM and FLES is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and 4 Less Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4 Less Group and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with 4 Less. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4 Less Group has no effect on the direction of GM i.e., GM and 4 Less go up and down completely randomly.
Pair Corralation between GM and 4 Less
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.15 times more return on investment than 4 Less. However, General Motors is 6.49 times less risky than 4 Less. It trades about 0.12 of its potential returns per unit of risk. 4 Less Group is currently generating about -0.15 per unit of risk. If you would invest 4,287 in General Motors on August 25, 2024 and sell it today you would earn a total of 1,566 from holding General Motors or generate 36.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. 4 Less Group
Performance |
| Timeline |
| General Motors |
| 4 Less Group |
GM and 4 Less Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and 4 Less
The main advantage of trading using opposite GM and 4 Less positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, 4 Less can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in 4 Less will offset losses from the drop in 4 Less' long position.The idea behind General Motors and 4 Less Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 4 Less vs. Allison Transmission Holdings | 4 Less vs. Luminar Technologies | 4 Less vs. Lear Corporation | 4 Less vs. BorgWarner |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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